Blockchain. What is next for HR and Payroll?

If you have followed our Blockchain series, by now you have a good understanding of what DLT or blockchain is, and how it can be applied to the HR space, in particular to make payroll more secure, manage your personal data and improve recruitment.

Blockchain technology has some inherent features that can help build the next generation of work-related platforms that are faster and more effective. So when will blockchain be part of existing HR solutions and will you see the first applications come to market?

Let’s go back to the first article, where we explained the concept of Distributed Ledger Technology (DLT). Hopefully, you have remembered from that explanation that there is no such thing as “the blockchain”.

As analyst firm Forrester states, it’s a “technology concept or architectural principle that can be realized in many ways”, meaning that many companies are experimenting with DLT and there is no single application of blockchain. That means that you need to carefully evaluate the market to understand the DLT’s that are out there and how these applications can be used in solutions.

Seeing through the hype

Blockchain is a bit of a hype. As read in Wired: “In this moment, few business trends can compete with the magic of blockchain technology” (187 Things Blockchain is supposed to fix). They are right to the point where adding the word ‘blockchain’ to a company name show immediately stock price gains (e.g. the announcement of a KodakOne blockchain network more than doubled the EastmanKodak share price).

We don’t want to suggest that all blockchain is hyped but suggest caution when it comes to results: we don’t yet understand or apply the technology well enough to fully grasp its implications and benefits. The World Economic Forum has published a white paper called Blockchain Beyond the Hype that includes a practical framework as well as a Decision tree, which can assist you in determining whether blockchain is the correct approach for a business problem or not.

High cost of energy

And then there is the energy consumption question that needs to be solved. Blockchain transactions are verified using extremely complex algorithms. This provides us with increased security, but also comes at an energy cost.

The early blockchain networks, like Bitcoin, require no permissions meaning that anyone can join in on the algorithm, but the trade-off is that as the process becomes increasingly complex, the network requires large amounts of computing power and thus more energy.

Not all applications require the same kind of security as a cryptocurrency network. As new DLT’s come to market, companies are changing the platform characteristics so that security is maintained while levels of energy consumption are lowered. Despite these alternatives, blockchains remain computationally intense when compared with traditional databases.

What will regulation look like?

At the moment regulation efforts seem to be focused on cryptocurrencies, but expect governments to closely watch what is happening with blockchain, especially as it relates to identities (of companies and people) and payments.

The European Parliament hosted a ‘Spotlight on Blockchain’ session in May 2018 to answer the question: “When and how should governments intervene?” Some U.S states are moving forward with blockchain regulation and implementation, e.g. Arizona (recognition of smart contracts) and Vermont (blockchain as evidence).

And, during an April meeting of ASEAN (Association of Southeast Asian Nations) there was a focus on DLT for cheap and secure transactions to promote financial inclusion for underserved and underbanked segments.

What should you do now?

We can’t give you an exact roadmap of how blockchain technology will evolve in coming years, but we are sure that you will see it become more mainstream as vendors, including NGA HR, start to bring DLT-based applications to market. Continue to separate blockchain from bitcoin – there’s a lot of speculation around cryptocurrencies that has nothing to do with the benefits of blockchain applications in business environments.

As you have read in this series, DLT-based applications offer important benefits when it comes to transactions that involve personal and payment data: increased security, faster transactions and limited data disclosure for a predetermined purpose.

Blockchain and DLT developments go very fast, and there are many experiments as well as real-world applications. Educate yourself by following the news and reading up on which projects go well and which go bust, and then apply that knowledge to the HR and payroll space.

All main technology vendors explore use cases for DLT in their solutions. It could be equally interesting to follow what niche vendors are doing, as they are typically not bound to a segment or industry, more agile and will quickly shift into other applications.

Use cases outside of the HR domain provide the perfect inspiration and encourage you to stretch your thinking beyond the obvious.

Reach out to your HR and payroll vendors and ask which use cases they are currently pursuing. NGA HR is happy to talk to you about our blockchain innovations and keep you posted as we bring HR and Payroll applications to market.

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Malcolm Bennett

Malcolm Bennett has been NGA Human Resources Group Counsel and Company Secretary since January 2015. He was previously Associate General Counsel for over 13 years with IBM and previously held legal positions with CMS Cameron McKenna and BHP Billiton prior to that.

Malcolm has experience in managing teams/departments and structuring and negotiating complex commercial transactions in multiple jurisdictions – he now leads a small team of legal, compliance and security professionals for NGA HR across the globe.

He studied Law at the University of Cape Town and now resides in Manchester with wife and son.

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